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Oxfam are one club golfers – for them more government is always the answer

Ryan Bourne

13 June 2014

Zero-hours contracts. High prices. Benefit cuts. Unemployment. Childcare costs. According to the international development charity Oxfam, the combination of these individual factors in Britain has created ‘The Perfect Storm’ for the poor – hammered by an age of austerity. In a controversial new campaign, accompanying a report entitled Below the Breadline, the charity paints a picture of a dystopian Britain, where families starve following the stripping away of the safety net by a cruel Conservative-led government.

No wonder the Conservatives are angry. The fact that the issues highlighted above mirror almost perfectly Ed Miliband’s developing election campaign has been taken by some Tory MPs as evidence that Oxfam are in cahoots with their electoral enemy. One MP, Conor Burns, has even reported the charity for investigation to the Charities Commission.

Whether or not the link between the Labour and Oxfam agendas is coincidental or not, it would seem a mistake for the Conservatives to give up this opportunity to engage with Oxfam’s arguments. Because the main problem with Oxfam’s campaign is not that it has highlighted the existence of issues which many people care about, but that its philosophy and its recommendations for dealing with these issues are all so predictably state-centric and left wing.

Oxfam has shown itself to be another anti-poverty campaigning group akin to the one-club golfer – its solution to every single problem is more government intervention and state spending.

This should not surprise us. Almost all of the anti-poverty advocacy groups in the UK see capitalism as unjust and the market economy as the cause of poverty. As my colleague Kristian Niemietz documented in his monograph Redefining the Poverty Debate, if poverty is interpreted as a by-product of free markets, then an anti-poverty strategy must necessarily be an anti-market strategy. What is needed is more government ‘action’.

That the coalition is having to cut the welfare budget to reduce the deficit is thus seen as a hacking away of the safety net. And the failure of governments to involve themselves with more regulation in markets for ‘essentials’ such as energy, childcare and housing, and controlling ‘unfair’ wages is seen a dereliction of duty. Work is not seen as a route out of poverty, and low-paid work especially is denigrated. Seen through this light, Oxfam’s recommendations make sense: ‘reinstate the safety net’, ‘action…on food poverty’, ‘increase the minimum wage…to the Living Wage’, fewer welfare sanctions.

Oxfam may be right that sanctions and some other policy measures have led to more use of food banks than before. But this misses the bigger-picture questions: why are so many people dependent on government support in the first place? And is an anti-poverty approach based upon the political whims of the government of the day really a sustainable away to dealing with poverty? These are questions that the many Conservatives who support the market economy should be thinking about and willing to debate Oxfam on.

Oxfam should be called out for adopting the typical left-wing dogma of equating poverty and inequality and blaming all negative outcomes on the market economy, for example. Most public understanding of the word poverty is poverty in an absolute sense. And there are many factors that lead to poverty, often problems which are exacerbated by government policies, including family breakdown, crime and addiction as well as unemployment caused by inadequate schooling, regulations that kill entry-level jobs and technological change. Oxfam and others’ approach to poverty is essentially materialist – the idea that all that matters is income, whatever the source. Yet this is treating the symptom of poverty rather than the ultimate causes.

The limits of a cash benefit approach to poverty can be easily observed. There was an enormous expansion of cash transfers under the last Labour government – particularly among families with children. Around 68 per cent of all children now live in a household receiving at least one major income transfer other than child benefit. The truth is, we don’t need to go to Scandinavia to experience Scandinavian levels of income transfers – international comparisons show this. But, for Oxfam, this is still not enough. That this approach has not eradicated poverty is evidence we simply need to do more.

Yet many of Oxfam’s policy recommendations are contradictory or would be damaging to opportunity – particularly in relation to work. Despite highlighting ‘unemployment’ as a key concern, it’s now clear that a shrinking of the state sector and the benefit reform undertaken so far has not led to more unemployment – in fact 2 million new private sector jobs have been created. Oxfam highlights that many of these are in low pay and many are zero-hours contracts (though yesterday’s figures suggested most new jobs were full-time) – but people should not be afraid to articulate that this is better than nothing.

Work brings with it an opportunity to acquire on-the-job skills, and an entry point from which to go on to better things. That’s why the public overwhelmingly supports welfare reform to make work pay. Oxfam’s solutions to zero-hours contracts and low pay, a ‘Living Wage’ and presumably less opportunity to use ZHCs would simply mean fewer opportunities for the most low-skilled people in society – those that you’d expect Oxfam would want to help. NIESR, for example, has calculated that 300,000 fewer young people would find work if the Living Wage was implemented nationwide and surveys suggest that the majority on ZHCs are happy with them. The only sustainable way to increase wages and opportunities is not government intervention, but a growing, innovative economy with rising productivity – nothing in Oxfam’s recommendations would help to achieve this.

Most importantly, however, those who believe in markets should highlight to Oxfam how in many areas it is in fact governments that push up the price of essential goods through misguided interventions, to the detriment of the poor. It is well established in academic literature, for example, that planning restrictions including green belts contribute structurally to increased house prices and rents – making housing less affordable (and it’s the poor who spend most of their income proportionally on housing). High commercial rents as a result of planning controls also lead to less productive delivery of essentials like food – feeding through into higher shopping bills. The absence of global free trade and the imposition of protectionist policies like the EU’s Common Agricultural Policy further drive up prices. Green energy policies push up bills deliberately while doing virtually nothing to stem global carbon emissions, again to the detriment of the poor. An excessively regulated childcare sector has driven out informal care and made childcare prohibitively expensive for many parents. And, of course, highly regressive taxation in the form of sin taxes hits the poor hardest.

That we don’t see Oxfam campaigning on any of these issues tells you all you need to know. For them there is no problem to which the solution is not more government. They carry just a 3-iron when the world is complex, and the structural problems of our economy require a full set of clubs.